In the title role is 12-year-old Simon Birch (Ian Michael Smith), who is afflicted with Morquio syndrome, a genetic disorder which causes dwarfism. The story begins when Joe Wentworth, played by Jim Carrey, visits the grave of his childhood friend Simon Birch, whose gravestone is marked 1952-1964. Joe explains that Simon is "the reason I believe in God." This is followed by a flashback to their friendship during the early '60s.

In Gravestown, Maine, young Joe Wentworth, played by Joseph Mazzello, doesn't know who his father is, and his loving mother Rebecca (Ashley Judd) won't tell him. Joe's best buddy is young Simon Birch, born so tiny that his classmates pass him about like a "doll." Simon’s mother is shown in a flashback giving birth to him by merely sneezing, implying the labor was made so easy because of his diminutive stature. Upon seeing his infant son for the first time in the nursery and told he would not survive, Simon’s father writes him off, thus beginning his lifetime of neglect. Ignored at home, Simon turns to Rebecca as a mother, and he often has dinner with the Wentworths. Part of Rebecca Wentworth’s importance is serving as Simon's surrogate mom, one who cares about the boy - unlike his real parents, who permit Simon to live with them but are otherwise uninvolved. Ben Goodrich, the drama teacher played by Oliver Platt, begins to date Rebecca. Joe initially resents him, and Ben tries to win the boy over with goofy gifts and behaviors. During a baseball game Simon is given his first chance at swinging the bat instead of standing at the plate waiting for the guaranteed walk and he gets the first hit of his life, a foul ball that strikes and kills Rebecca Wentworth. Joe does not hate Simon for this turn of events because he understands that Simon has also lost his mother figure in Rebecca, but Simon himself is racked with guilt and begs God for forgiveness.

These two early adolescents quickly endear themselves to the viewer. Although their routine is typical - playing baseball, racing to the creek for a swim, discussing girls - the script (by Mark Steven Johnson) has them perform these growing up tasks with quirky originality. Simon's self-deprecating humor is especially charming. He one-ups Joe in physical comparisons, though he goes for the smaller instead of the superior. He accepts playing the Baby Jesus because he is the only student who will fit in the crib. And he rides in a wooden Coca-Cola crate rigged up as a sidecar to Joe's bike. On the dress rehearsal day, Simon finds a boy crying about a retreat. Simon tells him to not worry, that he will be there for him; he then ascertains that small children listen to him because of his size. During the play--as they show the hook bending because of the angel's actor's large size--the angel begins to fall. Simon's crush, who is playing the virgin Mary, bends over the crate, asking Simon what the matter is. He is under pressure because while she bends over her breasts are emphasized. After all the wait, the last time Marjorie asks him, what is the matter, he grabs at her and yells, "Boobies!". Reverend Russell takes him to the office to discuss his acting up. Simon talks about how God has big plans for him, but Father tells him to not get too excited. The Father then takes Simon's baseball cards. Simon and Joe walk home but Simon decides to go back to his house. The next day when the religious retreat starts, Joe drops by to say goodbye to Simon. His mother rudely tells him that Simon is sick, grabs some laundry and leaves. Then Simon' father comes out the outhouse, telling Joe the same. Feeling that Simon is neglected enough, Joe yells at Simon' father, telling him that Simon is a hero.

Simon comes with the boy whom he said he would take care of. He tells Joe that while they're gone he's going to sneak into Father Russell' office and get his baseball cards. They say their regards and wave goodbye. He goes into Father's office and finds his cards. When he sets down his flashlight it shows a baseball which is significant to Joe. Simon and Ben rush to tell Joe that Father Russell is really his father, and get there right when Father tells him, himself.

The retreat ends, and Simon wants to ride on the bus with Joe. The bus driver is going down a road, and sees a baby deer. He immediately stomps on his brake and Ben swerves right behind them. He, unharmed, sees the bus going down the hill, out of anyone' control. The Father then faints and the bus enters the water. The bus driver hits his head on the floor, gets up, and leaves. All the kids freak out and do not listen to Joe. Realizing this is his chance, Simon takes charge, and begins delivering orders. The other kids listen and all but one are safely brought ashore. Simon then realizes this and goes back. He finds and saves the boy that had been left behind; however, right when Simon is about to get out, the bus goes down. Joe goes under but cannot find him. Simon then floats up, saving himself. Joe passes out, and awakens at the hospital. He says his last goodbye to Simon, who then dies.

One of the last scenes is Joe running to go swim, and seeing a baby deer-- Simon. The scene ends, bringing us back to the beginning where an older Joe Wentworth is looking at Simon's gravestone. He makes a comment to his son, who has taken the name Simon.